Alternate Bid Prices

When developing a bid form for a public works project that includes an alternate bid, it’s important to be very clear on what you want bidders to actually bid on.

Alternate bids are used differently by different agencies. In its purest sense, an alternate bid should be an alternate material for part of the construction project or an alternate method of construction.

Thus, in asking bidders for a bid price, be clear that you’re asking for the price differential between what is included in the base bid and the alternate bid for the alternate material or method. Otherwise, you may have bidders who include the entire price for performing the work of the alternate. Bidders need to all be bidding on an equal basis, and public agencies need to have a clear way to evaluate bids consistently.

If you ask bidders to bid on the total price for the alternate work (not just the price differential), you won’t have any way to determine how much they actually bid for the material or method in the base bid, unless, of course, you have a unit price bid form that includes these.

Insurance Cancellation Period - 45 or 30 days?

If you have been named as an additional insured on a contractor's or consultant's commercial general liability policy, remember that under Washington State law (RCW 48.18.290 (1)(a)(i)), the insurance company must provide you with 45 days cancellation notice of the policy. Some insurance companies will try to only provide 30 days cancellation notice, but you have a right to insist on 45 days notice.

The World of Prevailing Wages

In the world of prevailing wages, not all prevailing wages are created equal. There’s a confusing array of different categories of prevailing wages, and it’s important for contract administrators with public agencies to know the difference so as to be in compliance with a variety of regulations.

Federal vs. State Wages: The most basic distinction is between prevailing wages established by the federal government (U.S. Department of Labor) and Washington State (Department of Labor and Industries).

If you have a federally funded public works project (even with just a small amount of federal money), both federal and state prevailing wages will apply. Your bidding and contract documents should specify that the more stringent or highest wage rate for a given classification will apply between federal and state prevailing wages.

There is one exception to this rule and that is for projects funded by the federal U.S. Department of Housing and Urban Development (HUD) for public housing purposes. 24 CRF 965.101 requires that only federal prevailing wages be used on these projects and that federal prevailing wages preempt state prevailing wages. This exception primarily applies to public housing authorities.

Type of Work Distinctions: In addition to the distinction between federal and state prevailing wages, the other major distinctions relate to the type of wages. Under both federal and state prevailing wages, there are different categories of wages depending on the type of work being performed.

For example, there are federal prevailing wages for the following: building (or commercial wages), heavy and highway, and residential. For Washington state prevailing wages, there are separate prevailing wages that apply to residential construction versus buildings and highways. Both federal and state prevailing wages have a multitude of requirements that specify when each type of prevailing wage is applicable.

Journey-level vs. Apprentice Wages: Another major category that distinguishes prevailing wage rates relates to journey-level wages versus apprentice wage rates. Generally, apprentices who are enrolled in an approved apprenticeship program under either federal or state requirements may be paid a percentage of the journey-level wages during their apprenticeship. Again, there are complex regulations governing apprenticeship prevailing wages.

Web Links: Visit the Online Reference page of Michael E. Purdy Associates for a list of links related to prevailing wages (and other subjects).

Questions: If you have specific questions about prevailing wages, when federal or state wages are applicable, what type of wages are appropriate for a particular project, or how apprentice wages work, please let me know.

RFP Training

Developing and Managing Requests For Proposals in the Public Sector

When: May 14 - 16, 2008, 8:00 AM - 5:00 PM

Duration: 3 Days

Where: Yakima, WA: Dept. of Agriculture, 21 N 1st Avenue, Suite 226, Room 238.

Sponsored by: NIGP (National Institute of Governmental Purchasing)

Cost:
Non-members: $750.00
Chapter Only Member: $750.00
National Members: $575.00
Chapter & National Member: $575.00

Click here to Register Online

General Description: This course is uniquely designed to prepare procurement professionals to use the RFP process to its maximum potential. The class agenda will identify the process, offer a key understanding of the elements of the proposal and ascertain ways in which the document can be used to its full capability. Pitfalls and success stories will make the class relevant and applicable when planning to incorporate this type of solicitation into the government process.

Port of Seattle to Hire Director of Procurement

In response to the highly critical audit of the Port of Seattle's construction management and contracting practices issued in late December 2007, the Port has begun recruiting for a new position: Director, Central Procurement Office. The creation and hiring of this new position was one of the key recommendations that the State Auditor made to the Port to begin to address the systemic contracting and procurement deficiencies in the Port's operations.

The job announcement for the new chief procurement officer position may be found online at: http://www.portseattle.org/about/employment/currentopenings.shtml#req2851

Correction on Prevailing Wage Legislation

Yesterday, I commented that legislation to increase the fees charged for filing a Statement of Intent to Pay Prevailing Wages and an Affidavit of Wages Paid from $25 to $40 didn't pass the Legislature. While it's true that HB 2942 didn't pass, the provision was put into EHB 3381 that did pass. So the fees will be going up. Sorry for the incorrect information.

Re-cap of 2008 Legislative Session

When it came to legislation affecting public contracting in Washington State, the 2008 Legislative Session was noteworthy for the extremely limited number of bills that passed and became law. In fact, the only one I was tracking that actually made it into law related to concerns arising from the State Auditor’s findings on the Port of Seattle’s construction management and contracting program. SB 3274 passed and makes certain changes related to port districts.

Legislation that did not pass includes the following, some of which will undoubtedly re-surface in the 2009 session, which will be a full session unlike the short one this winter.

Alternative Public Works Contracting: HB 2780, crafted and endorsed by the well-respected Capital Projects Advisory Review Board (CPARB), was a clean-up bill from the 2007 session and fixed some of the problems in the re-authorization of alternative public works contracting. Most of the focus of HB 2780 was on design-build and would have permitted use of some design-build-operate-maintain projects. The bill passed the House, but not the Senate. This bill will likely show up again next year, but with further refinements of the various alternative public works contracting methods (design-build, general contractor/construction manager (GC/CM), and job order contracting).

Expansion of Qualifications Based Selection: ESSB 6235 would have expanded qualifications based selection (not using price as a criterion for selection) to include project and construction management, in addition to the current disciplines covered in RCW 39.80 (architects, engineers, landscape architects, land surveyors). This bill also included a number of issues that were part of port district reform, and did not pass. The bill was supported by the architectural and engineering community, but in my mind would not be in the public’s best interests – public agencies should be able to use price for selecting these consultants. I have a more detailed analysis of the issues surrounding this subject if you’re interested.

Prevailing Wages for Off-Site Prefabrication: HB 2864 passed the House but not the Senate. It would have required public agencies to collect data about off-site prefabricators prior to acceptance of a public works project. The issue stems from the fact that in Washington State prevailing wages must be paid for off-site prefabrication of materials for a public works project if the materials are not standard, off-the-shelf items, but are specifically fabricated for the public works project. The applicable wages are those in the county where the product is prefabricated. A number of fabricators have moved their operations to Idaho and Oregon, just across the Washington state line in order to avoid having the pay prevailing wages and thus be more competitive. This practice has labor unions particularly concerned as it is putting firms out of business who are not able to compete with low wages paid across state lines. In addition, the state is losing tax revenues.

Trench Excavation: HB 2009 was a hold-over bill from the 2007 legislative session and was crafted by CPARB. It would have eliminated the requirement for listing the dollar amount for trench excavation safety shoring on the bid form. Failing to get any traction this session, this bill got buried, and didn’t pass either house. Look for it again next year when hopefully support for it can be shored up.

Fees for Intents and Affidavits: HB 2942 would have increased the filing fee for a Statement of Intent to Pay Prevailing Wages and an Affidavit of Wages Paid from $25 to $40. No one was willing to put any money on this bill and it didn’t pass either house.

Veteran’s Preferences: HB 2210 passed the House but not the Senate. It was a poorly written and confusing to implement piece of legislation that would have required certain percentages of public contracts to be awarded to veteran owned businesses and would have created a certification process for such businesses. The bill is becoming a veteran in Olympia, having been introduced in 2007 originally and it may make another appearance in 2009.

Mike M. Johnson: While there was a lot of discussion between public owners and the Associated General Contractors (AGC) on this issue stemming from a Washington State Supreme Court decision, the AGC chose not to introduce any legislation this session, instead engaging in dialogue with owners to develop a consensus and compromise bill that both parties could live with. Hopefully, the dialogue will continue and the parties can reach a consensus before the next session. AGC has all but given notice that they will introduce some bill in the 2009 legislative session.

There were a host of other bills that did not pass including those related to bid limits for cities and counties (HB 3030), living wages on public contracts (HB 2853), and OMWBE (HB 2925).

If you know of important bills affecting public contracting (public works, consultant, architectural or engineering, or procurement of goods and supplies) that passed during the 2008 Legislative session, please let me know.

Contracting in a Post I-200 Environment

In 1998, the voters of Washington state approved Initiative 200 that prohibits, among other things, public agencies from granting preference or discriminating in the award of public contracts based on race or gender.

Prior to the passage in I-200 many public agencies applied “set-asides” to their contracts, meaning that a certain percentage of the total dollar amount of a contract was required to be performed by (either by the contractor or subcontractor) businesses owned and controlled by minorities (MBE – Minority Business Enterprises) or women (WBE – Women’s Business Enterprises).

In a post I-200 environment, it is difficult for public agencies to demonstrate that MBEs and WBEs are being used on public contracts in percentages anywhere near what they were prior to the passage of I-200. Agencies often do significant outreach to MBEs and WBEs, but the nature of public bidding laws (for construction, consulting, and purchase of goods and services) makes it difficult to actually improve the percentage utilization of MBEs and WBEs.

Ultimately, it seems to me, public agencies may be more helpful in providing MBEs and WBEs with appropriate tools to help them complete successfully in the private sector where there are not the same kinds of bidding constraints and where contracting is more often based on relationships and effective business partnerships.

Public agencies can provide resources to help mentor MBEs and WBEs, facilitate the development of relationships with other contractors and consultants and larger private businesses, and help MBEs and WBEs build strategic partnerships. It’s a difficult problem of how to ensure that our region creates a vibrate economy that embraces the wide diversity of business ownership that is reflective of the diversity of our population.

Bid Protests and Appeals

Bid protests are nothing new. On Tuesday, March 11^th, Boeing filed a formal protest on the Pentagon’s decision to award an Air Force tanker contract to its rivals. See story in the Seattle Times.

In Washington State, there are at least three laws that deal with bid protests on public works construction projects, all of which provide due process for the protesting bidder and establish time deadlines for filing a protest.

Public Works Contracts: RCW 39.04.105 prohibits a public agency from executing a public works contract with any bidder other that the protester without giving the protester as least two full business days’ written notice of its intent to execute a contract. The two day provision is there to give the protesting bidder an opportunity to seek a court injunction against the public agency moving forward with the contract. This two day delay in contract execution, however, only applies if the protesting bidder has submitted a written protest no later than two full business days after bid opening.

This law applies to “municipalities” which are defined in RCW 39.04.010 as “every city, county, town, district, or other public agency authorized by law to require the execution of public work.” In this last session of the Legislature, SSHB 3274 was approved that added “port district” to the list of agencies covered by the term “municipality,” a partial response to the highly critical audit of the Port of Seattle’s construction management and contracting practices conducted by the Washington State Auditor’s Office.

GC/CM Contracting: RCW 39.10.380 (4) applies to the public subcontract bidding conducted by a General Contractor/Construction Manager (GC/CM) under contract with a public agency. If the GC/CM receives a written protest from a subcontract bidder or an equipment or material supplier, the GC/CM is under the same constraints as a public agency (as noted above) against executing a contract with any bidder other than the protester without giving at least two full business day’s written notice to all bidders of the GC/CM’s intent to execute a contract for the subcontract bid package. Likewise, the protester must submit its written protest no later than two full business days following the bid opening.

Bidder Responsibility: In RCW 39.04.350, a public agency may establish supplemental bidder responsibility criteria. If the public agency finds that the low bidder does not meet the criteria, the bidder may appeal the determination within the time period specified in the bidding documents (a period established by the public agency). The public agency must consider the information submitted in the appeal. If the public agency continues to affirm that the bidder is not responsible and does not meet the supplemental bidder responsibility criteria, it issues its final determination to the disqualified bidder. However, the public agency may not execute a contract with any other bidder (other than the protester) until two business days (it doesn’t say “two full business days” as the other laws cited above do) after the not-responsible bidder has received the public agency’s final determination.

Off-Site, Pre-fabrication Legislation Not Approved

Under the Washington State Supreme Court decision in the Everett Concrete Products case, the court ruled that products specifically pre-fabricated for a public works project off-site were subject to prevailing wages for the county in which the product was fabricated.

Since then a number of fabrication firms have moved across the Washington border to Idaho and Oregon where they are not subject to Washington's prevailing wage regulations, thus enabling them to pay less than the prevailing wage for the closest Washington county.

HB 2864 was an attempt to begin to collect data on the extent of the problem with out of state fabricators. The bill, which passed the House did not come up for a vote on the floor of the Senate and therefore died for this session. The bill has gone through a number of changes since introduced, but it is still problematic from a public owner's perspective. The language of the bill is not clear and adds additional requirements for contractors and owners that are difficult to interpret. Hopefully, there can be some additional thought devoted to fixing the flawed language in the bill for the 2009 session.

April 8th Deadline for Applications to CPARB's Project Review Committee

The Capital Projects Advisory Review Board (CPARB) is still seeking five members for open positions on the Project Review Committee, in the following categories:

1 to represent Public Hospitals,

1 to represent Counties,

1 to represent Cities,

1 to represent Construction Trades Labor, and

1 to represent MWBE (this could be from OMWBE or an MBE or WBE).

CPARB appoints members to the Project Review Committee and is seeking applications by April 8th in order to make appointments at the April 10th CPARB meeting. Click on the following link for the application form: http://www.ga.wa.gov/cparb/PRC/NoticeForApplicants.pdf

Members of the Project Review Committee meet monthly to review applications from public agencies seeking approval to use the General Contractor/Construction Manager (GC/CM) or Design/Build process, or to obtain approval as an experienced public agency to use these processes without specific project approval.

Please pass this information along to anyone you know of who may be interested and qualified to serve on the Project Review Committee.

Alternative Public Works Legislation Fails

HB 2780 failed to pass the 2008 session of the Washington State Legislature.

The bill did pass in the House by an overwhelming vote of 93 in favor with none opposed. The bill was the result of discussions and negotiations by members of the Capital Projects Advisory Review Board (CPARB) that helped promoted the legislation. However, in this short session of the Legislature, the bill failed to move forward in the Senate and did not come up for a vote even on the floor of the Senate.

This is a setback for alternative public works contracting in the state. The bill was drafted to clean up some issues remaining from the reauthorization of the alternative public works law that went into effect on July 1, 2007. It is likely that CPARB will continue to push for this legislation in the 2009 session along with other clean up and modifications to the law.

Alternative public works offers three additional project delivery or contracting methods above the traditional "Design Bid Build" method. The three alternative methods are: General Contractor/Construction Manager (GC/CM), Design-Build, and Job Order Contracting.

Negotiation and Mediation

We all deal with negotiation and mediation everyday, whether it's part of our work with contracts, or in our personal life. So what's the difference between negotiation and mediation?

Negotiation is communicating as an advocate to reach an agreement. It's trying to convince another party that your position is the one they should adopt.

Mediation, on the other hand, is helping people who are advocates to reach an agreement by acting as a neutral facilitator, translator, idea stimulator, confidante.

Both are important in contracting. On the one hand, negotiating to get the best terms for your agency. On the other hand, mediating between two disputing parties.

If you find yourself in need of either negotiation or mediation assistance, feel free to contact me.

Thanks to Rhonda Hilyer of Agreement Dynamics for the definitions of negotiation and mediation.

Links for Verifying Bidder Responsibility

I've developed an easy to use list of the links necessary to verify that a bidder meets the mandatory bidder responsibility criteria required by Washington State law (RCW 39.04.350).

Visit and bookmark my Resources webpage to use this tool.

Preparing for a Performance Audit

You've read about the scathing performance audit on the Port of Seattle's construction management and contracting program that was conducted by the Washington State Auditor's Office. When will your agency receive it's performance audit? How can you prepare for it? What lessons can you learn from the Port's experience and the experience of other public agencies?

On April 1, 2008, the American Public Works Association's Washington State Chapter will sponsor a training session on Performance Audits that will feature speakers from the State Auditor's Office, the Washington State Department of Transportation (WSDOT) who was recently audited (click here for WSDOT's audit), and a consultant who participated in WSDOT's audit.

The training will be from 9:30 a.m. until 3:00 p.m. in Ocean Shores, Washington at the Ocean Shores Convention Center. The cost is $50, which includes lunch.

The registration deadline is March 24th. There are currently only 29 spaces remaining. Maximum attendance is 100. Visit APWA's website for more information and to register online.

Initiative 900, which became effective in December 2005, requires the State Auditor ‘s Office (SAO) to conduct independent, comprehensive performance audits of state and local government, provides a funding source for the audits and urges the SAO to start with the largest, costliest government entities and eventually audit all 2,700 governmental agencies. It also specifies that performance audits be conducted in accordance with Government Auditing Standards, which are issued by the United States Government Accountability Office.

Each performance audit is to include, but not be limited to the following nine objectives:

1. Identification of cost savings.
2. Identification of services that can be reduced or eliminated.
3. Identification of programs or services that can be transferred to the private sector.
4. Analysis of gaps or overlaps in programs or services and recommendations to correct them.
5. Feasibility of pooling the entity’s information technology systems.
6. Analysis of the roles and functions of the entity and recommendations to change or eliminate roles or functions.
7. Recommendations for statutory or regulatory changes that may be necessary for the entity to properly carry out its functions.
8. Analysis of the entity’s performance data, performance measures and self-assessment systems.
9. Identification of best practices.

The SAO has conducted at least nine performance audits since 2005.

Business Networking at the Regional Contracting Forum

The 2008 Regional Contracting Forum will be held this coming Tuesday, March 11th from 8:00 a.m. until 3:30 p.m. at Sound Transit Union Station, 401 South Jackson Street, in Seattle.

The Regional Contracting Forum is hosted by a number of government agencies including the Washington State Department of Transportation, Office of Minority and Women Business Enterprises, Sound Transit, Port of Seattle, King County, and City of Seattle. These agencies, in collaboration with other public agencies, will come together to share information on upcoming contracting opportunities, procurement processes, and resources with contractors, consultants, and suppliers.

To learn more details and register online visit the Regional Contracting Forum website. Pre-registration is recommended

The Forum provides an opportunity for businesses to network, participate in one-on-one conversations with procurement representatives, and access information about resources that can help in reaching business goals.

Small businesses, including minority, women, and disadvantaged businesses, are encouraged to attend this forum.

Training: New Standard Contract Documents for Capital Construction

On Friday, March 21, 2008, the Northwest Construction Consumer Council (NWCCC) and the Associated General Contractors of Washington (AGC) will jointly sponsor a training session on the "New Standard Contract Documents for Capital Construction."

It will be held at the SeaTac Airport Hilton Hotel from 8:00 a.m. (check-in starts at 7:30 a.m.) until noon, at which time lunch will be served. It is free for NWCCC and AGC Members, while non-members pay $129.

Subjects to be discussed include ConsensusDOCS, AIA Documents, and Tri-Party Agreements. Speakers include Brian Perlberg, Senior Counsel, AGC of America; Tom Owens, Principal and General Counsel, NBBJ; Will Lichtig, Partner, McDonough Holland & Allen, PC; Bob Bourg, Washington State Department of General Administration.

Visit NWCCC's website for more information and to register.

Sole Source Pricing

What if you have a sole source product or service? How do you determine whether the prices you’re being charged are reasonable, especially if you’ve been using the sole source provider for some time?

This can actually be a fairly difficult situation to verify, but here are a couple of possible ideas. None of these strategies solves the entire problem, but taken together they can help provide a reality check on the prices you’re being charged.

• Compare the prices you’re being charged with what the sole source provider is charging other customers. You can ask the sole source provider for a list of such customers for you to contact, or if you know of customers that are also using this provider, you could contact them directly. Sometimes other government agencies may have contracts that have been competitively bid in which the provider you’re using competed, and these prices can be used to compare with what you’re paying.

• Compare the prices you’re being charged with the prices that other providers with similar products or services charge.

• Review the prices you’re being charged now with the prices you were charged by your sole source provider last year, the year before, or two years ago. Are the percentage price increases reasonable and consistent with changes in the Consumer Price Index? If any of the price increases over time appear unreasonable, have a discussion with the sole source provider about the reasons for the percentage increases.

• If other portions of your agency used the same sole source provider, find out from them what prices they paid for the same products or services that you’re procuring.

• Ask the sole source provider for permission to review and audit their prices and the basis of those prices. Depending on the complexity and nature of the pricing structure, you may want to engage the services of a consultant or your accounting or other staff to help in such a review.

If you have other ideas on how to approach this problem, let me know.

ESSB 6235 Pulled from Committee Agenda

On Thursday morning, February 28th, the House Committee on Local Government pulled ESSB 6235 from the scheduled hearing planned for that morning. This means that the bill won't be considered further for this session of the Legislature.

I consider this a positive step as the expansion of qualifications based selection into construction and project management would not be in the public's best interests. The bill would have prohibited public agencies from using cost as a selection criterion for these services. Government agencies should have the right to obtain competitive prices and help reduce costs.